britannia v1.0

7/30/2019 Britannia v1.0

1/9

About the Industry:

India has the second largest arable land of 161 million hectares and has the highest acreageunder

irrigation. Next to China, India ranks second largest food producer in the world and has the potential

to immerge the biggest with its food and agricultural sector. India accounts for less than 1.5% of

international food trade despite being one of the worlds major food producers, which indicates

huge potential for both investors and exporters. The total milk production in the country is 127

million tons with per capita availability of 229 gms per day. The industry had been recording an

annual growth of 4% during the period 1993-2012, which is almost 3 times the average growth rate

of the dairy industry in the world. India produces over 85 mn tons of milk annually. The total milk

economy is estimated at Rs 1300 billion in terms of value.

IndiaWorlds second largest Food & Dairy Industry segments:

Dairy, Fruits & Vegetable Processing Grain Processing Meat & Poultry Processing Fisheries Packaged foods/drinking water/beverages Industry valued at $135 Million Estimated to reach $200 Million by 2015 GDP Contribution: 7%

Highest share of Food Industry is from Dairy Sector

Industry Demand (Past, Present & Future):

0

50

100

150

200

250300

350

400

450

500

Demand(Milliontons)

Year

Chart Title


2/9

About the Company:

Britannia is Indias Second largest company in Food & Dairy Industry. Started in 1892 in Calcutta with

an investment of Rs.295. It went public in the year 1978 and Indian shareholders percentage

crossed 60%. In 1983 it crossed Rs.100 crores revenues. Dairy products constitute 10% of the

revenue of Britannia whereas the biscuits constitute the rest of the share. It has succeeded ingarnering the trust of almost one-third of India's 1.21 billion population. Currently it has revenues of

$825 million and profit of $24 million.

Shareholding Pattern:

Some Key Data:

Face value Rs.2

52 week high Rs. 599.9

52 week low Rs. 380

Market capitalization Rs.5761.14 Cr

Book value(Net worth /No. of shares) Rs.47.26

Price to book value Rs.11.08

PE multiple (trailing twelve months - TTM) 32.02Market capita8lization to sales 1.1582

Dividend % 425%

Average daily volume 35,797

Beta() 0.372

Earnings Per Share 15.76

Yesterday's market price Rs.470.9

Dividend yield 1.77

ROE 32.02

8Payout ratio 63.18General analysts forecast 13.57%

50.92

17.5

15.88

13.95

1.74 Foreign Promoters

Public

Foreign Institutions

Financial

Institutions/Banks

Other Companies


3/9

1 yr govt. of India bond rate(risk free rate) 8.46%

Risk premium of Indian equity market 6.52%

Stock Performance of the company:

Britannia-Balance Sheet:

Industry :Food And Dairy Products

Multinational

(Rs in Crs)

Year

Mar

12 Mar 11

Mar

10

Mar

09

Mar

08

Mar

07

SOURCES OF FUNDS :

Share Capital 23.89 23.89 23.89 23.89 23.89 23.89

Reserves Total 496.15 427.41 372.36 800.65 731.92 590.93

Equity Share Warrants 0 0 0 0 0 0

Equity Application Money 0 0 0 0 0 0

Total Shareholders Funds 520.04 451.3 396.25 824.54 755.81 614.82

Secured Loans 0.58 406.89 408.1 2.2 1.94 1.53Unsecured Loans 27.57 23.68 21.51 22.97 104.16 3.25

Total Debt 28.15 430.57 429.61 25.17 106.1 4.78

Other Liabilities 136.73 138.67 0 0 0 0

Total Liabilities 684.92 1,020.54 825.86 849.71 861.91 619.6

APPLICATION OF FUNDS :

Gross Block 677.36 593.56 547.83 511.5 453.18 392.11

Less : Accumulated Depreciation 298.27 289.86 266.33 233.66 212.19 193.75

Less:Impairment of Assets 0 0 0 0 0 0

Net Block 379.09 303.7 281.5 277.84 240.99 198.36

Lease Adjustment 0 0 0 0 0 0Capital Work in Progress 79.73 11.7 9.97 6.02 9.69 16.03


4/9

Investments 428.94 545 490.64 423.1 380.83 320.05

Current Assets, Loans & Advances

Inventories 382.28 311.2 268.34 253.63 301.53 214.94

Sundry Debtors 52.14 57.26 39.49 49.61 46.32 28.61

Cash and Bank 30.94 28.75 23.36 40.8 43.77 48.65

Loans and Advances 182.08 70.63 207.7 195.3 160.84 89.17

Total Current Assets 647.44 467.84 538.89 539.34 552.46 381.37

Less : Current Liabilities and Provisions

Current Liabilities 854.46 359.06 310.89 265.8 247.02 236.72

Provisions 124.8 96.65 190.83 147.48 100.65 86.31

Total Current Liabilities 979.26 455.71 501.72 413.28 347.67 323.03

Net Current Assets

-

331.82 12.13 37.17 126.06 204.79 58.34

Miscellaneous Expenses not written off 0 0 0 26.64 23.23 25.58

Deferred Tax Assets 23.68 22.87 31.18 14.31 25.02 19.37Deferred Tax Liability 31.84 29.11 24.6 24.26 22.64 18.13

Net Deferred Tax -8.16 -6.24 6.58 -9.95 2.38 1.24

Other Assets 137.14 154.25 0 0 0 0

Total Assets 684.92 1,020.54 825.86 849.71 861.91 619.6

Contingent Liabilities 34.4 110.08 268.75 160.39 173.49 81.13

Britannia Profit & Loss:

(Rs in Crs)

Year

Dec

11(12)

Dec

10(12)

Dec

09(12)

Dec

08(9)

Mar

08(12)

INCOME :

Sales Turnover 737.83 484.38 407.99 771.78 2,512.41

Excise Duty 71.38 45.91 32.9 81.18 314.36

Net Sales 666.45 438.47 375.09 690.6 2,198.05

Other Income 81.78 59.5 33.26 68.44 40.14

Stock Adjustments 13.11 1.69 2.55 -15.58 42.11

Total Income 761.34 499.66 410.9 743.46 2,280.30

EXPENDITURE :Raw Materials 459.84 292.67 238.54 504.57 1,656.05

Power & Fuel Cost 6.47 5.48 5.03 5.48 15.88

Employee Cost 47 37.85 31.1 47.68 126.74

Other Manufacturing Expenses 18.07 13.42 12.05 15.47 37.4

Selling and Administration Expenses 62.66 41.97 54.72 89.7 258.06

Miscellaneous Expenses 10.43 8.3 12.31 26.93 40.08

Less: Pre-operative Expenses

Capitalised 0 0 0 0.12 0.36

Total Expenditure 604.47 399.69 353.75 689.71 2,133.85

Operating Profit 156.87 99.97 57.15 53.75 146.45Interest 2.02 2.57 0.42 3.59 17.77


5/9

Gross Profit154.85 97.4 56.73 50.16 128.68

Depreciation 13.02 10.79 10.1 15.2 43.07

Profit Before Tax 141.83 86.61 46.63 34.96 85.61

Tax 15.59 10.5 9.72 32.99 20.3

Fringe Benefit tax 0 0 0.04 0.43 1.85

Deferred Tax 1.69 0.67 -0.66 -37.46 0.41

Reported Net Profit 124.55 75.44 37.53 39 63.05

Extraordinary Items 23.94 15 -9.2 1.84 -0.18

Adjusted Net Profit 100.61 60.44 46.73 37.16 63.23

Adjst. below Net Profit 0 0 -95.23 0 0

P & L Balance brought forward 313.11 275.24 356.5 337.84 297.54

Statutory Appropriations 0 0 0 0 0

Appropriations 56.04 37.57 23.56 20.34 22.75

P & L Balance carried down 381.62 313.11 275.24 356.5 337.84Dividend 43.19 29.63 18.69 14.05 14.05

Preference Dividend 0 0 0 0 0

Equity Dividend % 160 110 70 50 50

Earnings Per Share-Unit Curr 46 27.85 28.96 17.38 21.59

Earnings Per Share(Adj)-Unit Curr

Book Value-Unit Curr 200.09 169.51 306.85 171.2 163.16

Britannia Cash Flow Statement:

Dec-

11

Dec-

10

Dec-

09 Dec-08 Mar-08

Cash Flow Summary

Cash and Cash Equivalents at Beginning of

the year 11.1 114

471.8

8

17.8500003

8

47.7299995

4

Net Cash from Operating Activities

84.3

4 43.75 21.96

33.7999992

4

83.4100036

6

Net Cash Used in Investing Activities

-

56.7

9

-

138.3

8

-

268.1

4

470.119995

1

-

67.4700012

2

Net Cash Used in Financing Activities

-

29.91 -8.27 -111.7

-

49.88999939

-

14.68999958

Net Inc/(Dec) in Cash and Cash Equivalent -2.36 -102.9

-

357.8

8

454.029998

8 1.25

Cash and Cash Equivalents at End of the year 8.74 11.1 114

471.880004

9

48.9799995

4

Valuation of Stock:

CAPM Model:


6/9

ri = rf+ (rm-rf)

rf= 8.46

rm-rf= 6.5

= 0.37

ri =10.865 %

Zero Growth Model:

Value of the Stock: Vs = D/r

where D = Dividend per share &

r = Hurdle rate or Reqd rate

Vs = 8.5/10.865

Vs = 0.7823

Gordon Model:

Value of the Stock:

Vs = (D1/(r g))

= (D0(1+g))/(r-g)

Calculation of Growth Rate, g:

1. Growth rate by Analyst,gA = 13.57%

2. Gdy = ri - (Dividend Yield)Gdy = 10.865 1.77

Gdy = 9.095%3. g = ROE * b

where

b = Retention ratio

b = (1-Payout ratio)

g = 13.57*0.368

g = 4.99376%


7/9

D0 = 8.5

D1 = 8.5(1.1187) = 100.895

r-g = 10.865 11.87 = -1.005

Vs = 100.895/(-1.005) = - 100.393

Implied Growth Rate:

r = (D1/P) + g

where P -> Market price

g = Analyst growth rate or can be historical growth rate

g = 13.57%

D1/P dividend yield

Ri = 10.865, D1/P = 1.77

g = 10.865 1.77

g = 9.095%

P = D0 (1+g)/(r-g)

where Numerator g = historical growth

480.7= 8.5(1.3077)/0.10865-g

g = 8.56%

CASH FLOW MODEL:

1. Historical CF growth rate

2. Sales growth rate as proxy3. Analyst forecast of future sales

P0 = FCF0 (1+g) / (r-g)

Where FCF0 Free Cash flow for the current year

Free Cash Flow = Net Income + Depreciation and Amortization Capital Expenditure + Net

Debt Financing

Depreciation & Amortization = 47.32 Cr


8/9

Capital Expenditure = 191.20 Cr

Net Income = 252.37 Cr

Net Debt Financing = 437.07

FCF = 545.56 Crores

P0 = 545.56 (1.1187)/1.005

P0 = Rs. 607.2815 Crores

Market Multiples Method:

E = P/(P/E) (company) 15.01249219

P = E * (P/E) (Industry) 549.4575

P = E * (P/E) (Industry) (analyst forecast) 559.2819

P = E * (P/E) (Company) (analyst forecast) 544.2609

Sensitivity Analysis:

Market Price = EPS * (P/E)

EPS/(P/E) 32.02 25.6 27.3 17.8

15.03 481.2606 384.768 410.319 267.53411.1 355.422 284.16 303.03 197.58

10.9 349.018 279.04 297.57 194.02

9.8 313.796 250.88 267.54 174.44

Analysis of the Company:

Opportunities:The Food and Dairy sector is booming owing to the increasing demand for the milk and milk

products. The nutritional benefits offered in the products plays a significant role for the demand and

the industry is buoyant. There is significant scope for growth of the company and the company can

cash in on the opportunities lying ahead. The company offers a variety of products and the products

width and depth can create a significant growth for the company in the future. The company is

known for introducing innovative products like Nutrichoice, Snackits in order to gratify the need

across the generations.

Threats:

The company has the first mover advantage in providing nutritional products addressing to diabetes

etc but the competitors have started to imitate that and they are launching new products addressing

similar needs.


9/9

Logistics is increasingly becoming a problem due to the volume of goods supplied. Bad road

conditions, increase in fuel costs are making a significant impact in the costs that are incurred.

Valuation:

The company is expected to grow at a substantial pace and is expected to net

britannia v1.0

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